Mortgage on a property is a very serious commitment one which you should not enter into lightly. The very first point to consider is the product which suits you. Since there are a lot of different products on the market, so choosing the right one is the first hurdle to cross. Below is a list of different mortgages:-
1)Repayment mortgage.. Where your monthly payments include interest on the outstanding money on your mortgage as well as a portion of the capital itself.
2)Interest only mortgages.. Your monthly payments just the interest element on the money that your borrowed.
3)Discounted mortgages.. Interest rate on your borrowing is discounted by an amount for a fixed period of time. For example, discounted for 2 years and then they revert back to the normal variable interest rate.
4)Tracker mortgage These as the name suggest track the interest rate of the central bank. For example, the borrower agrees to pay 0.65 above the central bank rate as his interest.
5)The much talked about the endowment mortgage. With this type of mortgage, you buy an insurance policy and use that as cash builder to hopefully pay for your mortgage when it falls due at the end of the full term.
6)One account mortgages.. Where payments can be made as flexible as you want but the interest rate accrues for the holiday periods chosen by you.
The above list is by no means exhaustive. There are other products on the market as well and more in the pipeline each and everyday.
Which mortgage suits you?
Each mortgage option has implications for your monthly outgoing. For example, paying just the interest element on your mortgage may appear to be the cheaper option for your cashflow but at the end of the term you still owe the lender the money which you borrowed to acquire your property. The repayment mortgage on the other hand may well be the best option but your monthly outgoing are likely to be higher.
Because any mortgage will drastically reduce your cost of living, choosing the right mortgage should be your top priority to provide both a home for yourself as well as maintaining a reasonable standard of living.
Finally before you can have any mortgage you need to satisfy the lender of two essential criterion:-
1)Property value as the lending is secured against the property, the value of the property should be higher or equivalent to the money being borrowed.
2)Your affordability.. Whether you can afford to keep up with the payments hence the reason for tests such as proof of income and previous track record are used to provide for an independent assessment of your ability to service the borrowing. |
